Banks can accept tax dues in cash under IDS: RBI

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The Reserve bank of India (RBI) on Thursday directed banks to accept tax dues in cash under the domestic black money declaration scheme which closes on September 30. Under the Income Declaration Scheme, 2016, which came into effect on June 1, one can come clean by paying tax, penalty and cess totalling 45 per cent of the undisclosed income.

It was brought to RBI’s notice by the government that “banks are hesitant” in allowing deposit of large amounts of cash by declarants under the scheme.


“We advise that banks must invariably accept cash, irrespective of amount, over the counters from all declarants who desire to deposit cash at the counters, including deposits under the above Scheme through challan ITNS- 286,” the central bank said.

The banks, however, have to comply with the Know Your Customer requirements.

Source: http://www.business-standard.com/article/pti-stories/banks-can-accept-tax-dues-in-cash-under-ids-rbi-116090801067_1.html

SEBI seeks major changes to new KYC process

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The Securities and Exchange Board of India (Sebi) has sought major changes in the newly implemented central Know Your Customer (KYC) process. The regulator has written that several market intermediaries such as mutual funds (MFs), brokerages and even banks were facing issues adhering to the new central KYC process.

Starting August 1, the government has shifted to the central KYC process, to enable common and one-time KYC for all financial market intermediaries. Central KYC is being implemented through the Central Registry of Secularisation and Asset Reconstruction and Security Interest of India (CERSAI), an online registry promoted by the central government.

In a recent letter, the capital market regulator has demanded a slew of changes, including more time between opening a new account and making an electronic entry with the central KYC registry.

KEY SEBI DEMANDS FROM FINMIN ON KYC
Extend time-period for compliance

Make Sebi-registered know your customer (KYC) agencies a pass-through link between market intermediaries and CERSAI

Exempt existing individual clients from fresh KYC process

Use UIDAI to enable e-KYC

Allow KRAs to do KYC on behalf of mutual funds

According to the norms, every financial institution needs to file an electronic copy of a client’s KYC records with the central registry within three days of an account being opened.

In a circular in July, Sebi had mandated all market intermediaries, including brokers and MFs, to make new KYC submissions to CERSAI. Several market players made representations to Sebi, highlighting the operational difficulties under the new system.

“It is a cumbersome job, right from disclosure to verification. We have sought extension in the timeline as deadline is not sufficient to meet the requirements,” said Nilesh Shah, managing director, Kotak AMC.

To sync the new system with the earlier common KYC, Sebi has also suggested to accept KYC Registration Agencies (KRAs) as a pass-through entity between registered intermediaries and CERSAI. Under the previous KYC regime, KRAs were the most important part of the system.

To avoid duplication of work, Sebi also wants to exempt individual clients whose accounts are opened before August 1 from undergoing KYC process all again. According to Sebi, KYC details of these clients are already with the KRAs and can be used even when they approach other registered intermediary for entering into account-based relationship, Sebi said in a letter to ministry.

Sebi had allowed interportability among KRAs, to enable sharing of information among them based on client’s permanent account number (PAN). To enable online KYC, Sebi has recognition of the Unique Identification Authority of India (UIDAI). The same would leverage the Aadhaar database and ease the process of doing business, said Sebi.

Apart from this, the regulator has also asked the ministry to allow share transfer agents to do KYC on behalf of mutual funds. However, the responsibility of KYC will continue to remain with the mutual fund on whose behalf the registrar carries out the KYC, noted Sebi.

 

Source: http://www.business-standard.com/article/markets/sebi-seeks-major-changes-to-new-kyc-process-116090300579_1.html

Tax dept not to take action on cash deposits made after declaring income under IDS

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The government has said no adverse action will be taken by Financial Intelligence Unit or the income-tax department solely on the basis of the information regarding cash deposit made consequent to the declaration under the black money scheme.

 

Credit for unclaimed tax deducted at source made on declared income shall be allowed and no capital gains tax or TDS (tax deducted at source) shall be levied on transfer of declared benami property from benamidar to the declarant without consideration.

 

To reassure people about the Income Declaration Scheme, 2016, which will close on September 30, the Central Board of Direct Taxes has come out with sixth set of clarifications in form of frequently asked questions.

 

It has again assured those wanting to declare unaccounted assets or income that information in respect of a valid declaration would be confidential and not be shared with any law enforcement agency nor shall be enquired into by the income-tax department itself.

 

The scheme provides an opportunity to persons who have not paid full taxes in the past to come forward and declare their undisclosed income and assets. The scheme came into effect on June 1, 2016 and is open for declarations up to September 30, 2016.

 

A total tax of 45 per cent including surcharge and penalty has to be paid.

 

The amount payable under the scheme can be deposited in instalments. As per the latest clarification, assets declared under the scheme are to be valued at cost of acquisition or at fair market price as on June 1, 2016 as determined by the registered valuer, whichever is higher.

 

However, an option for valuation of registered immovable property on the basis of stamp duty value of acquisition adjusted with the Cost Inflation Index has also been provided.

 

The amount of fictitious liabilities recorded in audited balance sheet and not linked to acquisition of an asset can be disclosed under the scheme as such. The period of holding of declared registered immovable assets shall be taken on the basis of the actual date of registration.

 

The valuation report obtained by the declarant from a registered valuer shall not be questioned by the department. However, the valuer’s accountability will remain, it said.

Source: http://economictimes.indiatimes.com/wealth/tax/tax-dept-not-to-take-action-on-cash-deposits-made-after-declaring-income-under-ids/articleshow/54022802.cms

British Columbia first foreign govt to issue masala bond

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Canada’s Province of British Columbia has become the first foreign government entity to issue a masala bond by floating Rs 500 crore rupee denominated overseas bonds on the London Stock Exchange.

The bond raised $75 million (about Rs 500 crore) with 6.62 per cent semi-annual yield, securing high-quality investor support from across Europe, Asia and America. It is a AAA rated bond by the three major rating agencies and will mature on January 9, 2020, The Province of British Columbia said in a statement on Friday.

Masala Bonds are rupee-denominated bonds issued to overseas buyers, aimed at investments into India’s infra needs.

The proceeds of the bond were immediately reinvested in HDFC’s second masala bond listing on the exchange.

India’s mortgage lender Housing Development Finance Corporation (HDFC) had on Friday said The Province of British Columbia has subscribed the entire of its second tranche of Rs 500 crore rupee denominated overseas bonds.

“This transaction is a landmark deal as it opens up a new market for sovereign issuers and investors,” HDFC Ltd Chairman Deepak Parekh said in a statement on Friday.

“The pioneering simultaneous transactions on the LSE confirm RBI Governor Rajan’s recent statement that Masala bond issuances reflect ‘a coming of age of Indian debt’,” said Nikhil Rathi, CEO of London Stock Exchange.

The latest issuances bring the total number of masala bonds listed on the LSE to 33, raising the equivalent to about $3.86 billion for Indian infrastructure.

British Columbia Minister of Finance Michael de Jong said: “The international reputation and platform provided by the LSE sets the stage for more Masala bond issuances from around the world and will be most welcome for sustaining the Masala bond market’s success.”

HDFC Ltd, one of India’s leading banking and financial services companies, had listed the world’s first masala bond by an Indian corporate in July.

Source: http://www.business-standard.com/article/markets/british-columbia-first-foreign-govt-to-issue-masala-bond-116090200652_1.html

Second instalment of FDI reforms cleared

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The Union Cabinet today approved the second instalment FDI of reforms, which the Centre has announced in June covering diverse sectors including Defence, food-processing, single brand retail and broadcasting.

The ex-post-facto approval for the reforms in the Foreign Direct Investment regime was given by the Cabinet in its meeting on Wednesday.

Under the amended rules, 100 per cent FDI with government approval is permitted for trading, including through e-commerce, in respect of food products manufactured and/or produced in India.

In Defence, foreign investment beyond 49 per cent is permitted through the approval route wherever it is likely to result in access to modern technology or for other reasons to be recorded. The state-of-the-art technology condition has been dropped.

In the broadcasting sector, the amendments allow 100 per cent FDI via the automatic route, up from 49 per cent.

To encourage investments in pharmaceuticals, the amendments allow 74 per cent FDI under the automatic route in the brownfield (existing projects) segment. Earlier, all FDI in brownfield projects had to come in through the government approval route.

Similarly, in the civil aviation sector, 100 per cent FDI under the automatic route has been allowed in brownfield projects as against 49 per cent earlier.

Local sourcing norms have been relaxed up to three years, with government approval for entities undertaking single brand retail trading of products having state-of-the-art and cutting edge technology. Thereafter, sourcing norms would be applicable.

Source: http://www.thehindubusinessline.com/todays-paper/tp-news/second-instalment-of-fdi-reforms-cleared/article9057070.ece

Reserve Bank widens market for sale of stressed assets

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In a bid to improve the sale of bad loans by lenders, the Reserve Bank of India has allowed banks to sell these assets to other banks, non-banking financial companies (NBFCs) or financial institutions. It has also made banks’ boards more accountable for stress resolution.

“Prospective buyers need not be restricted to SCs/RCs (securitisation companies/reconstruction companies). Banks may also offer the assets to other banks/NBFCs/FIs, etc, who have the necessary capital and expertise in resolving stressed assets,” said RBI.

The RBI believes this will lead to better price discovery, and to attract more buyers lenders have been asked to follow the e-auction process. Prospective buyers should also be given a minimum of two weeks for due-diligence and in case the exposure is above Rs 50 crore, then banks need to get at least two external valuation reports.

The head of banking and finance practice with an international advisory firm said while the intent was good, it was more an effort to regularise the process by specifying rules for asset sale. But, instead of leaving it to bank boards to decide on the valuation framework, the regulator could specify the standard policy for asset sale.

To expedite the process, RBI has nudged banks to use the “Swiss challenge method” to sell non-performing loans of recent vintage. Under this method, an entity (bank or lender) that receives an unsolicited bid for an asset or project has to publish the bid and invite third parties to match or exceed it. The entity that submits the unsolicited bid will be allowed to match or better the ensuing best bid.

RBI has decided to restrict banks’ investment in security receipts (SRs) backed by their own stressed assets. This is being done to ensure that there is “true sale of assets,” said RBI.  The central bank has said from April 1, 2017, when SRs’ value is above 50 per cent of the amount of assets sold, banks need to make higher provisioning that should either be the net asset value declared by the SCs/RCs or provisioning as if it was a direct loan. However, from April 1, 2018, the threshold will be reduced to 10 per cent.

These ARCs or SCs will also have the first right of refusal in case they have already acquired a significant share, 25-30 per cent, of the asset.

Lenders have been asked to set up a board for early recognition and sale of assets, which must conduct periodic review at least once a year, and the board needs to be involved in the entire sale process, RBI said.

According to the norms, banks need to adopt a “top-down” process, which means their head offices will be involved in identification of the assets. This is in line with several steps taken by RBI to tackle rising stressed loans, which at the end of the quarter ended June stood at 12 per cent of the total advances.

Source: http://www.business-standard.com/article/finance/reserve-bank-widens-market-for-sale-of-stressed-assets-116090101033_1.html

IDS: CBDT issues circular endorsing validity of e-declarations

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The CBDT has issued an order endorsing the legal validity of the e-declarations made under the ongoing domestic black money window, known as the Income Declaration Scheme (IDS).

With only a month left for the IDS to close on September 30, the Central Board of Direct Taxes (CBDT) said for those entities who make declarations of their domestic untaxed assets in the online mode, the Commissioner rank officer of its Central Processing Centre (CPC) in Bengaluru will be “deemed” as the authority for receiving such declarations under the relevant sections of the I-T Act.

“In continuation to Circular No 19 of 2016, dated 25th May, 2016, the Commissioner of Income-tax, Centralised Processing Centre, headquartered at Bengaluru shall exercise the concurrent powers and functions in respect of the declaration referred to in section 183 of the Finance Act, 2016 which has been furnished electronically under digital signature and shall also be deemed to be the Principal Commissioner or the Commissioner for the purposes of section 186 of the Finance Act, 2016 in respect of such declaration,” the CBDT said.

The CPC based in Bengaluru is the nodal wing of the tax department to receive online filings and Income Tax Returns.

There are two options to file black money declarations under the one-time IDS, one by filling up physical form before a Principal Commissioner of Income Tax in any part of the country and the other by the official e-filing portal of the I-T department.

“The circular has been brought out to endorse the legal validity of IDS declarations made by the e-filing website. It was issued keeping in mind the legal requirement,” a senior official said.

The CBDT, till now, has issued five sets of clarifications or frequently asked questions (FAQs) containing answers to various questions on the implementation of the IDS.

The government, sometime back, had extended the deadline for payment of tax and penalty under IDS and allowed declarants to pay the amount in three instalments by September 30 next year.

The first instalment of 25 per cent under the IDS 2016 will have to be paid by November 2016, followed by another 25 per cent by March 31, 2017.

The remaining amount will have to be paid to the exchequer by September 30, 2017.

Earlier the tax, surcharge and penalty under the black money disclosure window were required to be paid by November 30.

The scheme was announced by the government with an aim to bring out black money from the domestic economy.

The government had come out with a similar scheme for Indians holding undisclosed income abroad.

The scheme will apply to undisclosed income whether in the form of investment in assets or otherwise, pertaining to financial year 2015-16 or earlier.

Source: http://www.thehindu.com/business/Economy/ids-cbdt-issues-circular-endorsing-validity-of-edeclarations/article9056076.ece